One subject
Swaps and financing
8 lessons, 31 glossary terms and 13 market guides cover this across the academy. Each one links to its own page, and nothing is repeated here.
Trading involves risk. You could lose more than your deposit.
The curriculum
8 lessons cover this.
In curriculum order, which is the order you would meet them.
- What you do not own with a CFDModule 01What you are actually trading7 min
- How a position is modified and closedModule 02The trade ticket6 min
- What a swap isModule 04What a trade actually costs10 min
- How financing differs across instrumentsModule 04What a trade actually costs7 min
- What a round turn actually costsModule 04What a trade actually costs10 min
- How cost moves your break evenModule 04What a trade actually costs7 min
- Rollover, holidays and thin marketsModule 06When the market moves8 min
- What interest rates do to a currencyModule 08Macro and the calendar9 min
The glossary
31 terms belong here.
Alphabetical, each defined in one sentence on its own page.
- Accrued interestInterest a bond has earned since its last coupon payment but not yet paid out, added to the purchase price so the seller keeps what accrued while holding it.
- All-in costEvery charge attached to a position added together, spread, commission and financing, stated as one figure for the complete round turn rather than as separate lines.
- Carry tradeA carry trade holds a higher yielding currency against a lower yielding one, so the interest rate differential between them is credited or debited daily while the position stays open.
- Cash indexA cash index instrument tracks the current level of a stock index itself rather than a dated future, so it carries no expiry and attracts a daily financing adjustment instead.
- CommodityA commodity is a physical good traded in standardised units where one unit is interchangeable with another of the same grade, so its price prices a quantity of the material rather than a claim on a company.
- ContangoContango describes a futures curve in which later delivery months cost more than nearer ones, a shape normally explained by the storage, insurance and financing of holding the physical asset.
- Corporate actionA corporate action is an event initiated by a listed company that changes the terms or the price of its shares, such as a dividend, a split, a rights issue, a merger or a delisting.
- Cost of carryCost of carry is the net cost of holding something over time: financing, storage and insurance on one side, any income or convenience the holding yields on the other.
- Currency swapA currency swap exchanges principal and interest in one currency for principal and interest in another, and the same word names the daily financing on a position held overnight.
- Dividend adjustmentA cash entry a provider applies to an open CFD when the underlying goes ex-dividend, crediting the long side and debiting the short side so the price drop lands on neither.
- Expiry dateAn expiry date is the day a dated contract ceases to exist, on which any position still open is settled at a final price or rolled into the next contract month.
- Forward contractA private agreement between two parties to exchange an asset on a stated future date at a price fixed today, negotiated directly rather than standardised and listed on an exchange.
- Futures contractA standardised, exchange traded agreement to buy or sell a set quantity of an asset on a stated date, margined daily and cleared through a house that stands between both sides.
- Holding periodThe time between the fill that opens a position and the fill that closes it, which decides how many overnight financing charges it carries on top of its one-off costs.
- Index CFDAn index CFD is a contract settled in cash against the level of a stock index, so a position follows the index without any share, fund unit or futures contract changing hands.
- Interest rateAn interest rate is the price of money over time, quoted as a percentage a year, and the rate a central bank sets for overnight lending anchors nearly every other rate denominated in that currency.
- Interest rate differentialAn interest rate differential is the gap between the interest rates of two currencies, and it is the quantity the overnight adjustment on a currency position is calculated from.
- MaturityMaturity is the date on which a contract's obligations fall due and the contract ends, after which nothing further is owed under it.
- Oil benchmarkAn oil benchmark is a crude grade at a named delivery point whose traded price is used to price other cargoes, Brent and West Texas Intermediate being the most quoted.
- Overnight financingOvernight financing is the credit or debit applied to a position still open at a provider's daily cut off, covering the cost of funding the contract's full value for one more day.
- Overnight positionAn overnight position is any position still open when the trading day rolls at the provider's cut off, which is the moment financing is applied and the settlement date moves forward.
- Position tradingPosition trading holds one view for weeks or months, so financing and the size of the eventual move matter far more to the result than entry timing or the spread paid.
- RolloverRollover carries a position past a date it would otherwise settle on: nightly, by moving a spot position's value date forward and applying a financing adjustment, or at expiry, by replacing an expiring contract with the next delivery month.
- SettlementSettlement is the moment the obligations created by a trade are discharged, when cash and title actually change hands, or, for a cash settled contract, when the difference is paid.
- Short positionA short position gains if the price falls and loses if it rises, and in a contract for difference it is opened by selling first, with the intention of buying the same contract back later.
- Spot priceThe spot price is the price for immediate delivery, settled on the market's standard short value date, as distinct from a price agreed today for delivery on some later date.
- SwapSwap is the interest adjustment credited or debited on a position held past the daily cut off, derived from the interest rate differential behind the instrument and adjusted by the provider's own charge.
- Swing tradingSwing trading holds positions for days to weeks to capture one move inside a larger trend, which brings overnight financing, weekend gaps and scheduled events into the arithmetic that intraday styles avoid.
- Value dateThe value date is the day a foreign exchange trade actually settles, conventionally two business days after dealing, and the date an open position is rolled forward to each night.
- Ex-dividend dateThe ex-dividend date is the first day a share trades without the right to a dividend already declared, so the price customarily opens lower by roughly the amount being paid.
- XAUXAU is the currency code for one troy ounce of gold, so a quote against the US dollar states dollars per ounce rather than a rate between two currencies.
The market guides
13 guides answer a question about it.
Standalone reference answers, entered laterally rather than worked through.
- Exotic currency pairsMarketsHow the market uses the term, why depth and financing differ here, and what the pegged Gulf pairs share.
- Index CFDsMarketsWhat the index market is, which contracts sit in the class, and how a CFD on a level is settled.
- Index dividend adjustmentsMarketsWhy a price return index falls on an ex dividend date, and the cash adjustment that offsets it.
- How the commodities and metals market worksMarketsThe four families the class divides into, who trades them, and the inventory arithmetic that sets prices.
- Contango and backwardationMarketsWhat the two curve shapes mean, the carry and convenience yield behind them, and what the roll costs.
- Share CFDs compared with owning sharesMarketsWhat a purchase carries that a contract does not, and the arithmetic that separates the two.
- Earnings season and the reporting calendarEventsWhy results cluster into seasons, how a release differs from a filing, and what a surprise measures.
- Swaps and overnight financingMechanicsWhy a position held past the daily cut off is credited or debited, and how the adjustment is worked out.
- The triple swap dayMechanicsThe settlement convention that produces a threefold financing entry on one day of the week.
- Rollover and the daily cutMechanicsWhat happens to an open position at the daily boundary, and why spreads widen around that moment.
- Dividend adjustments on shares and indicesMechanicsWhy a dividend produces a cash entry, and the withholding that makes the adjustment smaller.
- Futures based CFDs and contract rolloverMechanicsWhich instruments are written on futures, what happens on the roll date, and what the curve shape costs.
- Ramadan and Eid market hoursStructureHow the lunar calendar moves the shortened month and its holidays, and what accrues while desks are shut.
Get started
Open your account in four steps.
A clear path from sign-up to your first trade, in four steps.
No depositNo documents
01/ 04step 1 of 4
Register
A few details to get started.
No deposit to open
02/ 04step 2 of 4
Verify
Confirm your identity, securely.
ID and proof of address
03/ 04step 3 of 4
Fund
Add money by bank transfer or card.
From $0
04/ 04step 4 of 4
Trade
Go live on the platform you already know.
MetaTrader 5
